CMS Announced New Insulin Payment Model

The Centers for Medicare and Medicaid Services (CMS) has announced a new, voluntary, Part D Senior Savings Model that would lower Medicare beneficiaries’ out-of-pocket costs for insulin to a maximum $35 copay per 30-day supply throughout the benefit year. CMS estimates $250 million in savings to the program over five years and an average 66% decrease in out-of-pocket costs for beneficiaries who join Part D plans participating in the model. The model begins on January 1, 2021.

Drug manufactures can apply through March 18, 2020, and Part D sponsors may submit a letter of intent by April 10, 2020, and must apply by May 1, 2020.  During the coverage gap phase of the Part D benefit, manufacturers may apply a 70% discount on the negotiated price of a drug. Under current policy, plans have a disincentive to offer supplemental benefits because, if enrollees’ copays are reduced through supplemental benefits, the 70% discount no longer applies to the negotiated price of the drug but just to what the plan has designated as the reduced copay for the enrollee. This results in an increased liability for the plan during the coverage gap phase.

Under the model, this restriction would be waived and the manufacturer would agree that any plan’s supplemental benefits apply after the 70% manufacturer discount is applied to the full negotiated price. The rollout of a payment model focused on reducing the cost of insulin for Medicare beneficiaries is not unexpected. It is part of a larger ongoing effort by the Administration to address the rising costs of pharmaceuticals.



For more information visit the McDermottPlus Payment Innovation Resource Center or contact Sheila Madhani at 202-204-1459 or